The AEC said the 1255 formal above-the-line ballots and 120 informal votes could not be located, rechecked or verified, despite searches of every electoral premise where the ballots were stored or transported from.

And with Clive Palmer and Senator Scott Ludlam both voicing their disbelief at the bizarre turn, AEC spokesman Phil Diak said the commission itself might ask the Court of Disputed Returns to finally declare the winners.

"The distribution of preferences and the declaration of the poll will go ahead and it is required to go ahead," Mr Diak said.

"Then the commission will consider the implications, and whether itself it regards the result as one that may need further consideration."

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Mr Diak added that there was a provision for a fresh by-election to be held, which the ABC's election expert Antony Green also said could happen.

As Mr Keelty was tasked with investigating the embarrassing blunder, Special Minister of State Senator Michael Ronaldson was promising a review of all aspects of the election process, including in WA.

"Incidents such as this go to the heart of the AEC's reputation. Trust in our democratic institutions is paramount," Senator Ronaldson said.

Mr Palmer, whose Palmer United Party candidate Dio Wang won a Senate seat in the initial count, said he intended to protest the process in the High Court, and also called for a full judicial inquiry.

"There is no question that the recount is invalid," Mr Palmer told AAP.

"If they declare a poll based on the second one they are seeking to manipulate the result, and they are doing that for an improper purpose in our view.

"Is the AEC trying to rig the election? Are they committing a fraud? Or are they just completely incompetent?"

Senator Ludlam, who lost his seat in the first tally when one crucial choke point in the count left him 14 votes short, said the result should not be declared until the missing ballots are found.

"It is going to shake people's confidence if the votes can't be found and if they declare the result, because that effectively disenfranchises people," Senator Ludlam said.

Once the writ has been issued, there is a 40-day window when any result can be challenged in the Court of Disputed Returns.

Mr Keelty's remit will include establishing the facts regarding the misplaced ballot papers, and identifying any failures that may have occurred.

"I wish to stress that Mr Keelty will undertake this investigation independently of the AEC and will be able to avail himself of whatever resources and access to staff and information he may require to assist his examination of this matter," Mr Killesteyn said.